Marcus & Millichap, Inc. (the “Company”, “Marcus &
Millichap”, or “MMI”) (NYSE: MMI), a leading national brokerage
firm specializing in commercial real estate investment sales,
financing, research and advisory services, today reported financial
results for the fourth quarter and the year ended December 31,
2023.
Fourth Quarter 2023 Highlights Compared to Fourth Quarter
2022
- Total revenue of $166.2 million, compared to $262.4 million
- Brokerage commissions of $144.6 million, compared to $235.8
million
- Private Client Market brokerage revenue of $94.8 million,
compared to $145.6 million
- Middle Market and Larger Transaction Market brokerage revenue
of $44.1 million, compared to $85.1 million
- Financing fees of $15.9 million, compared to $21.6 million
- Net loss of $10.2 million, or $0.27 per common share, diluted,
compared to net income of $7.9 million, or $0.20 per common share,
diluted
- Earnings were also impacted by higher expenses related to
investments in growth initiatives, including talent acquisition and
retention
- Adjusted EBITDA of $(4.5) million, compared to $14.1
million
Full Year 2023 Highlights Compared to Full Year 2022
- Total revenue of $645.9 million, compared to $1,301.7 million
- Brokerage commissions of $559.8 million, compared to $1,170.3
million
- Private Client Market brokerage revenue of $373.0 million,
compared to $682.0 million
- Middle Market and Larger Transaction Market brokerage revenue
of $165.9 million, compared to $463.5 million
- Financing fees of $66.9 million, compared to $113.0
million
- Net loss of $34.0 million, or $0.88 per common share, diluted,
compared to net income of $104.2 million, or $2.59 per common
share, diluted
- Earnings were also impacted by higher expenses related to
investments in growth initiatives, including talent acquisition and
retention
- Adjusted EBITDA of $(19.6) million, compared to $165.5
million
“Our fourth quarter results continued to reflect the ongoing
market disruption created by the Fed’s fight against inflation and
persistent interest rate volatility impacting real estate
valuations,” said Hessam Nadji, president and chief executive
officer. “We continue to take advantage of our leading brand and
strong financial position to leverage the current period by
attracting leading professionals, pursuing strategic investments
and acquisitions, and enhancing our technology.”
Mr. Nadji continued, “Looking ahead, uncertainty regarding the
timing and scale of the Fed’s plan to lower interest rates
continues to weigh on investor motivation. We believe the eventual
Fed shift, coupled with growing evidence of an economic soft
landing will become catalysts to an increase in transactions and
release of pent-up demand held by investors waiting for clarity.
With record capital on the sideline, as values adjust we are seeing
more buyer activity and offers on well-priced inventory we are
bringing to market. MMI’s branding, talent acquisition and platform
enhancements are positioning us well to lead in the eventual market
recovery. In the interim, our focus remains on maintaining a strong
balance sheet, fostering client relationships and strengthening the
business for the long term.”
Fourth Quarter 2023 Results Compared to Fourth Quarter
2022
Total revenue for the fourth quarter 2023 was $166.2 million, a
decrease of 36.7% compared to $262.4 million for the fourth quarter
2022.
For real estate brokerage commissions, revenue was $144.6
million, a decrease of 38.7% compared to the same period in the
prior year. The decline is primarily attributed to a 30.8% decline
in transactions. The average transaction size and the average
commission per transaction decreased by 3.7% and 11.4%,
respectively, compared to the fourth quarter 2022. Private Client
Market revenue decreased by 34.9%, and the combined Middle Market
and Larger Transaction Market revenue decreased by 48.2%.
For financing fees, revenue was $15.9 million, a decrease of
26.5% from the same period in the prior year, primarily attributed
to a 41.9% decline in transactions, while the average fee per
transaction and the average transaction size increased by 20.2% and
5.3%, respectively.
Total operating expenses for the fourth quarter 2023 were $183.4
million, compared to $256.6 million for the same period in the
prior year. The change was primarily due to reductions of 41.7% in
cost of services, partially offset by a 2.9% increase in selling,
general and administrative expenses and a 2.3% increase in
depreciation and amortization expenses. Cost of services as a
percentage of total revenue decreased by 550 basis points to 63.4%
compared to the same period during the prior year primarily due to
our senior investment sales and financing professionals earning a
lower amount of additional commissions due to lower revenue.
Selling, general and administrative expenses for the fourth
quarter 2023 were $74.7 million, compared to $72.6 million, for the
same period in 2022. The increase was primarily due to costs
incurred from consolidation of office space and incremental costs
from stock-based compensation, partially offset by a reduction in
compensation-related costs, specifically performance-based
bonuses.
Net loss for the fourth quarter 2023 was $10.2 million, or $0.27
per common share, diluted, compared to a net income of $7.9
million, or $0.20 per common share, diluted, for the same period in
2022. Adjusted EBITDA for the fourth quarter 2023 was $(4.5)
million, compared to $14.1 million for the same period in the prior
year, primarily as a result of the decrease in operating
income.
Full Year 2023 Results Compared to Full Year 2022
Total revenue for 2023 was $645.9 million, compared to $1,301.7
million for 2022, a decrease of $655.8 million, or 50.4%. Total
operating expenses for 2023 decreased by 39.4% to $705.3 million
compared to $1,164.3 million for 2022. Cost of services as a
percent of total revenues decreased to 63.0%, down 240 basis points
compared to 2022. The Company’s net loss for 2023 was $34.0
million, or $0.88 per common share, diluted, compared to a net
income of $104.2 million, or $2.59 per common share, diluted, for
2022. Adjusted EBITDA for 2023 decreased to $(19.6) million, from
$165.5 million for 2022. As of December 31, 2023, the Company had
1,783 investment sales and financing professionals, compared to
1,904 in 2022.
Capital Allocation
During the twelve months ended December 31, 2023, the Company
declared two semi-annual regular dividends totaling $20.4 million,
and repurchased 1,260,251 shares of common stock for an aggregate
purchase price of $38.9 million.
After accounting for shares repurchased through December 31,
2023, the Company has approximately $71.5 million available to
repurchase shares under its share repurchase program. No time limit
has been established for the completion of the program, and the
repurchases are expected to be executed from time-to-time, subject
to general business and market conditions and other investment
opportunities, through open market purchases or privately
negotiated transactions, including through Rule 10b5-1 plans.
Business Outlook
Notwithstanding the ongoing price discovery and wider than
normal bid/ask spreads, the commercial real estate transaction
market is poised over the long-term to overcome the near term
challenges which are currently expected to extend for the first
half of 2024. Accordingly, the Company believes it remains
well-positioned to achieve long-term growth.
The Company benefits from its experienced management team,
infrastructure investments, industry-leading market research and
proprietary technology. The size and fragmentation of the Private
Client Market continues to offer long-term growth opportunities
through consolidation. This highly fragmented market segment
consistently accounts for over 80% of all commercial property sales
transactions and over 60% of the commission pool. The top 10
brokerage firms led by MMI have an estimated 20% share of this
segment by transaction count.
Key factors that may influence the Company’s business during
2024 include:
- Volatility in transactional activity and investor sentiment
driven by:
- The elevated cost of debt capital
- Interest rate uncertainty and the heightened bid-ask spread
between buyers and sellers
- Risks of a potential recession and its unfavorable impact to
CRE space demand
- Possible impact to market sentiment related to the presidential
election, potential tax and other policy changes which may
influence transaction velocity and/or future fluctuations in sales
and financing activity
- Increase in operating expenses driven by labor costs,
insurance, taxes and construction materials
- Volatility in each of the Company’s markets
- Increase in costs related to in-person events, client meetings,
and conferences
- Global geopolitical uncertainty, which may cause investors to
refrain from transacting
- The potential for acquisition activity and subsequent
integration
Webcast and Call Information
Marcus & Millichap will host a live webcast today to discuss
the financial results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern
Time. The webcast will be accessible through the Investor Relations
section of Marcus & Millichap's website at
ir.marcusmillichap.com and will be archived upon completion of the
call. The Company encourages the use of the webcast due to
potential extended wait times to access the conference call via
dial-in.
For those unable to access the webcast, callers from the United
States and Canada should dial 1-877-407-9208 ten minutes prior to
the scheduled call time. International callers should dial
1-201-493-6784.
Replay Information
For those unable to participate during the live broadcast, a
telephonic replay of the call will also be available from 1:30 p.m.
Eastern Time on Friday, February 16, 2024 through 11:59 p.m.
Eastern Time on Friday, March 1, 2024 by dialing 1-844-512-2921 in
the United States and Canada or 1-412-317-6671 internationally and
entering passcode 13743289.
About Marcus & Millichap, Inc.
Marcus & Millichap, Inc. is a leading national brokerage
firm specializing in commercial real estate investment sales,
financing, research and advisory services. As of December 31, 2023,
the Company had 1,783 investment sales and financing professionals
in more than 80 offices who provide investment brokerage and
financing services to sellers and buyers of commercial real estate.
The Company also offers market research, consulting and advisory
services to our clients. Marcus & Millichap closed 7,546
transactions in 2023, with a sales volume of $43.6 billion. For
additional information, please visit www.MarcusMillichap.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements, including the
Company’s business outlook for 2024, market consensus on interest
rate decreases in 2024 and for the 2024 economic forecast, our
expectations of 2024 commercial real estate sales activity in the
wake of reduced interest rates, the execution of our capital return
program, including a semi-annual dividend and stock repurchase
program, and expectations for market share growth. We have based
these forward-looking statements largely on our current
expectations and projections about future events and financial
trends affecting the financial condition of our business.
Forward-looking statements should not be read as a guarantee of
future performance or results and will not necessarily be accurate
indications of the times at, or by, which such performance or
results may be achieved. Forward-looking statements are based on
information available at the time those statements are made and/or
management’s good faith belief as of that time with respect to
future events and are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those
expressed in or suggested by the forward-looking statements.
Important factors that could cause such differences include, but
are not limited to:
- general uncertainty in the capital markets, a worsening of
economic conditions, and the rate and pace of economic recovery
following an economic downturn;
- changes in our business operations;
- market trends in the commercial real estate market or the
general economy, including the impact of inflation and increased
interest rates;
- our ability to attract and retain qualified senior executives,
managers and investment sales and financing professionals;
- the impact of forgivable loans and related expense resulting
from the recruitment and retention of agents;
- the effects of increased competition on our business;
- our ability to successfully enter new markets or increase our
market share;
- our ability to successfully expand our services and businesses
and to manage any such expansions;
- our ability to retain existing clients and develop new
clients;
- our ability to keep pace with changes in technology;
- any business interruption or technology failure, including
cybersecurity risks and ransomware attacks, and any related impact
on our reputation;
- changes in interest rates, availability of capital, tax laws,
employment laws or other government regulation affecting our
business;
- our ability to successfully identify, negotiate, execute and
integrate accretive acquisitions; and
- other risk factors included under “Risk Factors” in our most
recent Annual Report on Form 10-K and Quarterly Report on Form
10-Q.
In addition, in this release, the words “believe,” “may,”
“will,” “estimate,” “continue,” “anticipate,” “intend,” "goal,"
“expect,” “predict,” “potential,” “should” and similar expressions,
as they relate to our Company, our business and our management, are
intended to identify forward-looking statements. In light of these
risks and uncertainties, the forward-looking events and
circumstances discussed in this release may not occur and actual
results could differ materially from those anticipated or implied
in the forward-looking statements.
Forward-looking statements speak only as of the date of this
release. You should not put undue reliance on any forward-looking
statements. We assume no obligation to update forward-looking
statements to reflect actual results, changes in assumptions or
changes in other factors affecting forward-looking information,
except to the extent required by applicable laws. If we update one
or more forward-looking statements, no inference should be drawn
that we will make additional updates with respect to those or other
forward-looking statements. We have not filed our Form 10-K for the
year ended December 31, 2023. As a result, all financial results
described in this earnings release should be considered
preliminary, and are subject to change to reflect any necessary
adjustments or changes in accounting estimates, that are identified
prior to the time we file our Form 10-K.
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended
December 31,
Years Ended
December 31,
2023
2022
2023
2022
Revenue:
Real estate brokerage commissions
$
144,559
$
235,827
$
559,752
$
1,170,310
Financing fees
15,877
21,615
66,898
112,978
Other revenue
5,807
5,007
19,277
18,422
Total revenue
166,243
262,449
645,927
1,301,710
Operating expenses:
Cost of services
105,427
180,724
406,645
850,894
Selling, general and administrative
74,702
72,629
285,023
300,009
Depreciation and amortization
3,315
3,239
13,627
13,406
Total operating expenses
183,444
256,592
705,295
1,164,309
Operating (loss) income
(17,201
)
5,857
(59,368
)
137,401
Other income, net
5,733
4,368
19,855
5,336
Interest expense
(216
)
(161
)
(888
)
(708
)
(Loss) income before (benefit) provision
for income taxes
(11,684
)
10,064
(40,401
)
142,029
(Benefit) provision for income taxes
(1,451
)
2,153
(6,366
)
37,804
Net (loss) income
$
(10,233
)
$
7,911
$
(34,035
)
$
104,225
(Loss) earnings per share:
Basic
$
(0.27
)
$
0.20
$
(0.88
)
$
2.61
Diluted
$
(0.27
)
$
0.20
$
(0.88
)
$
2.59
Weighted average common shares
outstanding:
Basic
38,415
39,461
38,659
39,893
Diluted
38,415
39,678
38,659
40,186
MARCUS & MILLICHAP, INC. KEY
OPERATING METRICS SUMMARY (Unaudited)
Total sales volume was approximately $11.9 billion for the three
months ended December 31, 2023, encompassing 1,947 transactions
consisting of $8.7 billion for real estate brokerage (1,413
transactions), $1.4 billion for financing (237 transactions) and
$1.8 billion in other transactions, including consulting and
advisory services (297 transactions). Total sales volume was $43.6
billion for the year ended December 31, 2023, encompassing 7,546
transactions consisting of $30.8 billion for real estate brokerage
(5,475 transactions), $6.7 billion for financing (1,076
transactions) and $6.1 billion in other transactions, including
consulting and advisory services (995 transactions). As of December
31, 2023, the Company had 1,684 investment sales professionals and
99 financing professionals. Key metrics for real estate brokerage
and financing activities (excluding other transactions) are as
follows:
Three Months Ended
December 31,
Years Ended
December 31,
Real Estate Brokerage
2023
2022
2023
2022
Average Number of Investment Sales
Professionals
1,705
1,799
1,744
1,817
Average Number of Transactions per
Investment
Sales Professional
0.83
1.14
3.14
5.01
Average Commission per Transaction
$
102,306
$
115,431
$
102,238
$
128,450
Average Commission Rate
1.66
%
1.80
%
1.82
%
1.72
%
Average Transaction Size (in
thousands)
$
6,168
$
6,407
$
5,630
$
7,473
Total Number of Transactions
1,413
2,043
5,475
9,111
Total Sales Volume (in millions)
$
8,716
$
13,090
$
30,823
$
68,088
Three Months Ended
December 31,
Years Ended
December 31,
Financing (1)
2023
2022
2023
2022
Average Number of Financing
Professionals
98
86
96
86
Average Number of Transactions per
Financing
Professional
2.42
4.74
11.21
24.92
Average Fee per Transaction
$
54,468
$
45,325
$
50,677
$
44,546
Average Fee Rate
0.89
%
0.78
%
0.81
%
0.74
%
Average Transaction Size (in
thousands)
$
6,133
$
5,823
$
6,254
$
5,984
Total Number of Transactions
237
408
1,076
2,143
Total Financing Volume (in millions)
$
1,453
$
2,376
$
6,729
$
12,823
(1)
Operating metrics exclude certain
financing fees not directly associated to transactions.
The following table sets forth the number of transactions, sales
volume and revenue by commercial real estate market segment for
real estate brokerage:
Three Months Ended December
31,
2023
2022
Change
Real Estate Brokerage
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
209
$
125
$
5,680
208
$
111
$
5,098
1
$
14
$
582
Private Client Market
($1 – <$10 million)
1,043
3,447
94,772
1,565
5,546
145,586
(522
)
(2,099
)
(50,814
)
Middle Market
($10 – <$20 million)
85
1,194
19,567
154
2,131
38,476
(69
)
(937
)
(18,909
)
Larger Transaction
Market (≥$20 million)
76
3,950
24,540
116
5,302
46,667
(40
)
(1,352
)
(22,127
)
1,413
$
8,716
$
144,559
2,043
$
13,090
$
235,827
(630
)
$
(4,374
)
$
(91,268
)
Year Ended December 31,
2023
2022
Change
Real Estate Brokerage
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
809
$
483
$
20,894
936
$
560
$
24,809
(127
)
$
(77
)
$
(3,915
)
Private Client Market
($1 – <$10 million)
4,097
13,616
372,979
6,850
24,474
682,019
(2,753
)
(10,858
)
(309,040
)
Middle Market
($10 – <$20 million)
303
4,117
73,007
735
9,980
188,593
(432
)
(5,863
)
(115,586
)
Larger Transaction
Market (≥$20 million)
266
12,607
92,872
590
33,074
274,889
(324
)
(20,467
)
(182,017
)
5,475
$
30,823
$
559,752
9,111
$
68,088
$
1,170,310
(3,636
)
$
(37,265
)
$
(610,558
)
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except for
shares and par value)
(Unaudited)
December 31,
2023
2022
Assets
Current assets:
Cash, cash equivalents, and restricted
cash
$
170,753
$
235,873
Commissions receivable
16,171
8,453
Prepaid expenses
8,813
9,411
Income tax receivable
9,299
8,682
Marketable debt securities,
available-for-sale (amortized cost of $169,018 and $254,682
at December 31, 2023 and December 31,
2022, respectively, and $0 allowance for
credit losses)
168,881
253,434
Advances and loans, net
3,574
4,005
Other assets, current
16,203
7,282
Total current assets
393,694
527,140
Property and equipment, net
27,450
27,644
Operating lease right-of-use assets,
net
90,058
87,945
Marketable debt securities,
available-for-sale (amortized cost of $69,537 and $72,819 at
December 31, 2023 and December 31, 2022,
respectively, and $0 allowance for credit
losses)
67,459
68,595
Assets held in rabbi trust
10,838
9,553
Deferred tax assets, net
46,930
41,321
Goodwill and other intangible assets,
net
51,183
55,696
Advances and loans, net
175,827
169,955
Other assets, non-current
14,972
15,859
Total assets
$
878,411
$
1,003,708
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
8,126
$
11,450
Deferred compensation and commissions
55,769
75,321
Operating lease liabilities
18,336
16,984
Accrued bonuses and other employee related
expenses
19,119
38,327
Other liabilities, current
3,919
9,933
Total current liabilities
105,269
152,015
Deferred compensation and commissions
47,771
64,461
Operating lease liabilities
69,407
65,109
Other liabilities, non-current
10,690
8,614
Total liabilities
233,137
290,199
Commitments and contingencies
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at December 31, 2023
and 2022, respectively
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued
and outstanding shares – 38,412,484 and
39,255,838 at December 31, 2023 and 2022,
respectively
4
4
Additional paid-in capital
153,740
131,541
Retained earnings
492,298
585,581
Accumulated other comprehensive loss
(768
)
(3,617
)
Total stockholders’ equity
645,274
713,509
Total liabilities and stockholders’
equity
$
878,411
$
1,003,708
MARCUS & MILLICHAP, INC. OTHER
INFORMATION (Unaudited)
Adjusted EBITDA Reconciliation
Adjusted EBITDA, which the Company defines as net (loss) income
before (i) interest income and other, including net realized gains
(losses) on marketable debt securities, available-for-sale and
cash, cash equivalents, and restricted cash, (ii) interest expense,
(iii) (benefit) provision for income taxes, (iv) depreciation and
amortization, and (v) stock-based compensation. The Company uses
Adjusted EBITDA in its business operations to evaluate the
performance of its business, develop budgets and measure its
performance against those budgets, among other things. The Company
also believes that analysts and investors use Adjusted EBITDA as a
supplemental measure to evaluate its overall operating performance.
However, Adjusted EBITDA has material limitations as a supplemental
metric and should not be considered in isolation or as a substitute
for analysis of the Company’s results as reported under U.S.
generally accepted accounting principles (“U.S. GAAP”). The Company
finds Adjusted EBITDA to be a useful management metric to assist in
evaluating performance, because Adjusted EBITDA eliminates items
related to capital structure, taxes and non-cash items. Considering
the foregoing limitations, the Company does not rely solely on
Adjusted EBITDA as a performance measure and also considers its
U.S. GAAP results. Adjusted EBITDA is not a measurement of the
Company’s financial performance under U.S. GAAP and should not be
considered as an alternative to net income, operating income or any
other measures calculated in accordance with U.S. GAAP. Because
Adjusted EBITDA is not calculated in the same manner by all
companies, it may not be comparable to other similarly titled
measures used by other companies.
A reconciliation of the most directly comparable U.S. GAAP
financial measure, net income, to Adjusted EBITDA is as follows (in
thousands):
Three Months Ended
December 31,
Years Ended December 31,
2023
2022
2023
2022
Net (loss) income
$
(10,233
)
$
7,911
$
(34,035
)
$
104,225
Adjustments:
Interest income and other (1)
(4,689
)
(3,992
)
(17,890
)
(7,951
)
Interest expense
216
161
888
708
(Benefit) provision for income taxes
(1,451
)
2,153
(6,366
)
37,804
Depreciation and amortization
3,315
3,239
13,627
13,406
Stock-based compensation
8,338
4,637
24,146
17,312
Adjusted EBITDA
$
(4,504
)
$
14,109
$
(19,630
)
$
165,504
(1)
Other includes net realized gains
(losses) on marketable debt securities available-for-sale.
Glossary of Terms
- Private Client Market segment: transactions with values from $1
million to up to but less than $10 million
- Middle Market segment: transactions with values from $10
million to up to but less than $20 million
- Larger Transaction Market segment: transactions with values of
$20 million and above
Certain Adjusted Metrics
Real Estate Brokerage
Following are actual and as adjusted metrics excluding any large
transactions in our real estate brokerage business in excess of
$300 million:
Three Months Ended
December 31, 2023
Year Ended
December 31, 2023
(actual)
(as adjusted)
(actual)
(as adjusted)
Total Sales Volume Decrease
(33.4)%
(33.4)%
(54.7)%
(51.9)%
Average Commission Rate (Decrease)
Increase
(7.8)%
(7.8)%
5.8%
2.2%
Average Transaction Size Decrease
(3.7)%
(3.7)%
(24.7)%
(20.0)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240216250379/en/
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Marcus and Millichap (NYSE:MMI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Marcus and Millichap (NYSE:MMI)
Historical Stock Chart
From Jul 2023 to Jul 2024